800 Indian exporters suspected of hoarding black money overseas

Nearly Rs. 100 crore in export earnings have been hoarded abroad by each of these exporters.

July 22, 2016 19:21 IST

Paramilitary policemen take off U.S. dollars strapped around a man's legs, at the border of Hong Kong and Shenzhen, Guangdong province, April 24, 2014. According to local media, the man was found trying to smuggle in total US$580,000 from the mainland to Hong Kong.Reuters

After wanting to cap cash transactions to Rs. 3 lakh and individual cash holding limit to Rs. 15 lakh, the Supreme Court-appointed special investigation team (SIT) on black money has now cast its net on dubious exporters.

Nearly 800 exporters are suspected to have hoarded their export proceeds abroad without bringing it back to India within the stipulated 1 year limit.

If the export proceeds are more than a year old, the SIT noted, it would amount to black money and bringing them back to India would mean attempt to launder it clean, said the investigators.

Nearly Rs. 100 crore in export earnings has been hoarded abroad by each of these exporters. In a few cases, money has been brought back to the country to be invested in Indian equity markets.

The Mint noted that such export proceeds stashed abroad were used to invest in the country through avenues like participatory notes, which form a part of foreign institutional investors (FIIs) investment into Indian equity market.

The act of bringing in this money and laundering it clean, investigators say is a violation of India's Foreign Exchange Management Act (FEMA). It therefore invites India's Enforcement Directorate (ED) to keep a tab on this economic crime.

Reserve Bank of India (RBI), which looks into country's macro data such as export-import, has been asked to create a warning system that could identify such cases to ED and the directorate of revenue intelligence (DRI) soon after the expiry within a year.

DRI is expected to scrutinize the accounts of these defaulters, who not only hold back export earnings overseas, but also claim refund on taxes paid on inputs to the exported goods under India's duty drawback schemes. This amounts to cheating India's rightful gains twice.

Ajai Sahai, the CEO of Federation of Indian Exports Organization (FIEO), told Mint that not all default was illicit. Liquidity shortage in some international markets could prompt "Indian exporters holding back their exports against an advance or a letter of credit," without realizing their payments, he added.